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Global warming is
increasing the risk of damage to lives and property from natural
disasters beyond what many insurers are willing to shoulder. And most
insurance companies aren't taking adequate steps to change that trend,
the survey found.

That's a problem even if you don't live by the coast:
When private insurers back out, the government is left to pick up much
of the damage costs; already, the federal flood insurance program is one of the nation's largest fiscal liabilities.

Ceres, an environmental nonprofit, evaluated the climate risk
management policies of 330 large insurance companies operating in the
United States. The results are worrying. Only nine companies, 3 percent
of the total, earned the highest ranking.

The insurers that scored highly on the survey (including several of
the world's biggest, such as Munich Re, Swiss Re, and Prudential) were
those that have adopted a broad range of climate-conscious products and
services, such as rate pricing plans that account for potential climate
impacts like storms and fires.

Some insurers are also investing in
high-end climate modeling software to better understand where their
risks really are. Others offer environmentally friendly plans like
mileage-based car insurance and encourage their customers to rebuild
damaged homes using green technologies. And some insurance companies are
making significant efforts to monitor and reduce their own carbon
footprint.

However, the report finds that one major way insurance companies are
adjusting to climate change is by not insuring properties that are
threatened by it, said Washington State Insurance Commissioner Mike
Kreidler, a lead author of the report.

"As a regulator, it's very bad to see markets being abandoned because of the threat that exists," he said.

Certainly the threat is real. Globally, average annual
weather-related losses have increased more than tenfold in the last
several decades, from $10 billion per year in the period 1974-1983 to
$131 billion in 2004-2013, according to the report. The insurance
industry is not keeping pace: The proportion of those damages that are
insured is steadily declining:

Tim McDonnell

Insurance companies are being squeezed by the dual forces of global warming and urbanization (the latter is especially a problem when it comes to wildfires),
so that the only way to stay profitable in vulnerable areas is to push
rates much higher than they currently are, Munich Re America CEO Tony
Kuczinski said in a press conference call. The easier option, and the
one more frequently chosen, is to simply pull out of risky areas
altogether.

"The view of the industry is that there is not risk-adequate pricing
in those areas, and that's why the government is the primary insurer
there," he said. "If rates were allowed to move in a direction that's
more accurate, it would encourage behavior change."

In other words, one way to limit climate-related losses is by using
market forces (i.e., sky-high insurance premiums) to encourage people
not to build in places that are likely to be flooded or burned.
Government rates, which are set to catch homeowners who fall through the
cracks, are generally too low to spur that kind of change.

Experts say that if insurance companies can find a way to remain
profitable without abandoning key markets, they will have a significant
role to play in helping property owners prepare for climate change. As
the industry most finely-attuned to analyzing risk, it's essential for
insurers to take a more proactive role in promoting climate adaptation
in building codes and other regulations, says Ceres president Mindy
Lubber.

"When they act and change, the entire economic sector listens and responds," she said.

Tim McDonnell

Climate Desk Associate Producer Tim McDonnell is Climate Desk's associate producer. For more of his stories, click here. Follow him on Twitter or send him an email at tmcdonnell@motherjones.com.